The Sears Tower Effect

“The Sears Tower Effect explains why universities have become bloated and expensive purveyors of curricula of questionable value, sold to snookered students buried in student debt. And it explains why Washington, D.C., has become a rich, distended, fat, flatulent, and fetid nest of lobbyists, bloodsuckers, overlords, lobbyists, and bureaucrats. ”

This essay explains how easily hubris sets in, bringing about an entitlement mentality among an organization’s administrative drones, creating as a costly by-product, what the author calls “Value-Subtracted Jobs”.

Recent examples of how the hubris of the very few can bring about misery for millions, can be found in the hubristic behavior of Mao Tse Tung, Winston Churchill and Victoria Nuland.
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AMERICA IS SEARS

At its peak, Sears Roebuck was the Walmart and Amazon of its day.

In the early 1970s, in a fit of hubris, Sears built the 100-story Sears Tower in the Chicago Loop. The Tower became the swank headquarters for its brigades of overpaid bureaucrats, fat cats, supernumeraries, paper pushers, and second-guessers. Separated physically, emotionally and culturally from customers and the rank-and-file, those at the top of the steep hierarchy looked down on their inferiors who shopped and worked in neglected Sears stores in the hinterlands.

In 1970, a company headquartered in a humble building in Rogers, Ark., went public. Its name was Walmart.

In 2000, across the Loop from the Sears Tower, Sears’ rival Montgomery Ward went out of business, 128 years after its founding. At the time of its demise, Wards was owned by—this is hard to believe—General Electric. Like Sears, Montgomery Ward also was headquartered in an office tower far removed from customers and the rank-and-file, albeit in a building that wasn’t as tall or grand as the Sears Tower.

In the year of Ward’s demise, Walmart’s revenue hit $165 billion.

Today, Sears is on its deathbed.

It’s a story that has been repeated hundreds of times in corporate America. It’s also a story that has been repeated in nation states and city states throughout history, whether they were empires, republics, democracies, monarchies, or dictatorships. It’s a story of birth, growth, maturity, decline, demise, and, rarely, rebirth. Someday Google will fall victim to this natural cycle. Walmart is already falling victim to it. And so is the USA.

As difficult as it is for companies to avoid decline, it’s an order of magnitude more difficult for a nation to do so, especially a democratic nation as large as the USA, where voters and interest groups aren’t keen about upsetting the status quo and inflicting pain on themselves. Also, corporations don’t have to bear the expense of armies and don’t have the ability to print money to temporarily mask their financial problems as the problems grow worse.

Yet three major causes of decline are shared by both corporations and nations alike, as follows:

Cause One: The Sears Tower Effect

As already alluded to, this is the natural tendency for power, prestige, pay, perks, and authority to agglomerate at corporate headquarters or in a national capital or in government in general, where decision-making metastasizes into bureaucracy, where accountability is replaced by self-interest, where hubris and arrogance replace humility, and where the wealth produced by those in the hinterlands is consumed by bigwigs, apparatchiks, lawyers, and regulatory specialists—most of whom have little talent to produce wealth but great talent at consuming it.

The bigger and swankier the headquarters, the quicker the decline. Likewise, the bigger and swankier the capital, the quicker the decline.

Metro Washington, D.C., which began as a swamp, now has seven of the ten wealthiest counties in the nation. It’s hard to imagine today, but when the nation’s capital was moved in 1800 from Philadelphia to its current location, all of the government’s records fit on one horse-drawn wagon.

You don’t hear much about the Sears Tower Effect, because it is largely ignored by the press, pundits, politicians, and professors (aka The Four P’s). The Four P’s ignore it because they don’t see it. And they don’t see it because they reside in the same socioeconomic pod. Most are physically, culturally, emotionally, and intellectually removed from where real work is done and real value is produced, such as in a mine, in a factory, in a lumber mill, on a farm, in an oilfield, on board a fishing boat, at the controls of a diesel locomotive, at the helm of a Mississippi River tugboat, at a construction site, in a cubicle in a technology company, in the minds of entrepreneurs and innovators, and in thousands of other places that are largely out of the sight and out of the mind of the peas in a pod.

The Sears Tower Effect explains why universities have become bloated and expensive purveyors of curricula of questionable value, sold to snookered students buried in student debt. And it explains why Washington, D.C., has become a rich, distended, fat, flatulent, and fetid nest of lobbyists, bloodsuckers, overlords, lobbyists, and bureaucrats.

Cause Two: A Sense of Entitlement

The second cause of the decline of companies and nations is that pay, pensions and benefits granted during the good times of high-growth and little competition morph into entitlements as the business or nation matures and competition increases.

Judith Bardwick, a psychologist and fellow business author and consultant, described the phenomenon as “Danger in the Comfort Zone,” in her best-selling business book of the same title.

A sense of entitlement dominated at Sears, GM, AT&T, IBM and hundreds of other companies, where employees were rewarded for breathing instead of performing, regardless of how the company was doing.

A sense of entitlement also dominates in the USA, where entitlements now consume 70% of the national budget, and where over 60% of households receive some sort of government entitlement, handout, subsidy, or government paycheck.

To turn the country around, politicians would have to allow market forces to transform the nation from a takings culture to a producing culture, a culture in which citizens would have to earn what they receive. Instead, remarkably and alarmingly, politicians are doing the opposite: Responding to voter demands, they are strengthening the entitlement culture and expanding the comfort zone to more people.

Examples abound: free medical care, free child care, the movement to eliminate grades and rankings in schools, another movement to excuse student loans and to make college free, still another movement to eliminate the SAT and other quantifiable entrance requirements for college, new labor rules that would make millions of employees eligible for overtime pay, steep increases in the minimum wage, and corporations accommodating the desire of Millennials for more free time—all of which will have the opposite of the intended affect. Over time, incomes and full-time employment will fall instead of rise, as they have in France, where it was believed that cutting the work week would result in full employment and prosperity.

Such suicidal lunacy is happening in the face of billions of industrious Chinese, Indians, Mexicans and other nationalities willing to work long hours for little pay. It’s a sobering economic fact that even if border walls were built and container ships were denied entry to U.S. ports, Americans would still have to compete with foreigners and work harder, longer, and smarter to maintain their standard of living, regardless of the lies told by Bernie, Hillary, Donald, and Ted.

Cause Three: Value-Subtracted Jobs

A value-subtracted job is the opposite of a value-added job. It is a job that reduces wealth, innovation and productivity instead of adding to wealth, innovation and productivity.

Value-subtracted jobs have grown in lockstep with the growth of the regulatory state, with the growing complexity of the tax code, and with the growth of the entitlement culture. They are also a manifestation of the Sears Tower Effect; that is, pay, power and prestige have accrued to the supernumeraries and bureaucrats at corporate headquarters or in the nation’s capital, at the expense of the producers of wealth in the hinterlands.

There are millions of private- and public-sector lawyers, accountants, managers, technicians, and clerks who specialize in the tax code, in OSHA regulations, in environmental regulations, in labor law, in ObamaCare, in fair housing laws, in SEC laws, in the Dodd-Frank law, in equal employment laws, in food labeling laws, and in thousands of other laws and regulations.

Every law, every rule, every regulation, and every new entry in the Federal Register spawns hundreds if not thousands of such jobs—a scary thought given that a new regulation is born every three hours.

Incumbents holding value-subtracted jobs are both Democrats and Republicans, most of whom are college graduates and white-collar. They form a massive and massively powerful interest group that will protect its rice bowl.

They also are well-paid.

For example, the median salary of a corporate environmental manager is $107,011, not counting benefits. Other examples: $135,357 for a senior tax manager, $71,444 for a government relations manager, and $58,275 for a HIPPA privacy officer. (Think about this the next time you complete a useless HIPPA privacy form in a doctor’s office.)

The career ladder in regulatory compliance has many steps and pay grades. Typical titles and salaries range from compliance coordinator ($36-$52K), to compliance analyst ($44-$66K), to compliance specialist ($40-$62K), to compliance manager ($58-$96K), and to chief compliance officer ($61-$195K).

Compliance managers for the Dodd-Frank monstrosity of a law are in high demand in Chicago, judging by their average salary in the windy city of $206,000. But that is not as much as the $316,962 that Michelle Obama earned one year in a signing bonus, salary and incentive bonus as vice president of community affairs at a Chicago hospital.

Michelle cares for the little people, you know. Speaking of whom, since the per-capita income in the USA is about $29,000, it would take the income of eleven little people to equal Michelle’s hospital income.

There are millions of other supernumeraries across the nation being supported by tens of millions of other little people, thanks to Democrats like Michelle and her husband Barack, who, in cahoots with many Republicans, has dramatically increased the number of regulations. For example, the cost of complying with Dodd-Frank is an estimated $24 billion, a staggering amount that is equal to the average income of 827,000 little people.

It’s no wonder that the cost of all levels of government has increased from about 12% of national income a century ago to nearly 50% today.

The little people paying for all of this waste are the same little people who used to shop at Sears before it declined but now shop at Walmart and elsewhere. Unfortunately, their government has become Sears, but they don’t have the option of choosing another government and putting the current one out of business.